Why smaller farms are becoming bigger players

With ABARES forecasting the gross value of Australian farm production to reach $61.3 billion in 2017-18 – 17 per cent above the five-year average to 2015–16 – it is clear Australian agriculture is performing well.

However, to fully realise the long-term opportunities, primary producers of all sizes need to consider the best ways of managing their businesses, not just in the paddock, but also in the office.

Recent data from the ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) farm surveys and the 2016 Australian Bureau of Statistics agricultural census reinforces the importance of proper business planning for primary producers – particularly our smaller farmers.

As it stands, small farms account for around 70pc of all broadacre and dairy farms in Australia and about 24pc of total farm business revenues.

That figure is set to climb given census data is showing a slow-down in farm consolidation – a substantial source of productivity gains in recent years.

Smaller farms are achieving stronger returns than they have for some time.

In fact, nationally, the total number of farms is on the rise, increasing from 84,720 in 2015 to 85,681 in 2016.

A driver behind this trend is revealed by the ABARES data that shows smaller farms (under $450,000 of revenue) achieved positive returns on capital (excluding capital appreciation) across all broadacre farming segments in 2015-16.

That compared with an average negative return over the five years to 2014-15 for wheat, mixed, and sheep industries.

While it is good to see more farmers entering the industry, bringing energy and new ideas, the need for robust structures and business strategies to support them could not be greater.

Especially as the industry looks attract capital required to support international competitiveness and our ability to grow global market share.

Smaller farms are achieving stronger returns than they have for some time, says ANZ Banking Group's Mark Bennett.

There is no single solution for producers looking to bridge capital gaps to expand and drive growth.

For smaller producers, it’s worth looking beyond the capital-intensive forms of growth, such as land acquisition, and consider the alternatives.

To fully realise the sector’s potential, all farms – both big and small – will need to carefully consider approaches to capital to ensure a positive return on investment and the chance to react as market conditions and opportunities evolve.

Mark Bennett is head of agribusiness and regional emerging banking with Australia and New Zealand Banking Group